Coal news and updates

The railway ministry is looking to get into a long-term arrangement with coal consumers for better utilization of rakes, in an attempt to make its revenues predictable.

 

The move comes eight years after it rejected a tripartite agreement that would have legally bound it to supply rakes for carriage of coal.

 

To make the arrangement watertight, the ministry also wants Coal India Ltd, the state-owned miner, to be part of the arrangement.

 

Coal accounts for about half of the railways’ revenue from freight, and because of the recent contraction in coal consumption by power producers, the ministry fears its revenue target for the year might not be met. The railways recently tweaked freight charges to incentivize carriage of coal to power plants located more than 700km from mines in a move that it claims is revenue-neutral for itself.

 

Such an agreement was previously not conceivable, admitted a key rail ministry official, asking not to be identified, but there’s been a “shift” and the ministry now wants coal consumers from various sectors such as power, steel and cement to commit to a minimum utilization of rakes for a more optimal deployment of railway resources.

 

CIL had estimated it would need 245 rakes a day to evacuate coal from its mines in the current year, but it has used only about 207 rakes a day between April and August because of the downturn in demand for coal, according to the official. Meanwhile, the ministry is expanding carriage capacity this year, spending about 60% of the budgetary allocation of Rs1.2 trillion—or about Rs72,000 crore—largely for the benefit of coal consumers, the official added.

 

The first draft of the proposed agreement has been prepared and discussions with various stakeholders are set to start soon, the official said. CIL, however, said it hadn’t heard from the ministry yet. It is willing to be part of the arrangement if it protects the interest of all stakeholders, a CIL official said, asking not to be identified.

 

Back in 2008, CIL had wanted a similar agreement with the railways, but at the time, the demand for rakes far exceeded what the ministry could commit to, the official at the miner said. “Now the situation has completely changed, so the railways wants to legally bind consumers to a minimum level of rake utilization,” said this person, adding that the ministry could follow a model similar to one CIL does with its long-term consumers.

 

Power producers will support the railways’ move provided their demands, too, are addressed by it. First, consumers should be included in the discussions, said Ashok Khurana, director-general of the Association of Power Producers, a lobby group. It should be a tripartite agreement, binding on CIL as well, according to Khurana, because otherwise there would be disputes over quality and quantity of coal received by consumers.

 

“Currently, no one is accountable for what happens post-loading and during transportation,” Khurana said. The transporter—in this case, the railways—has to take responsibility for the cargo, and power producers will back the agreement proposed by the ministry, according to Khurana. He added that this is how it works for coal imported into India.

 

“Consumers should pay for what is received,” Khurana said. But typically, consumers in India end up paying for what is said to have been dispatched, he said. There’s always a sizeable difference between what CIL claims to have dispatched and what is received in terms of quality and quantity, he said.

SOurce:Livemint